What are builder approval requirements for a USDA New Construction Loan?

September 14th, 2018 by Sean Stephens

How does a new home get built with the USDA No Down Payment Construction to Permanent mortgage?

In today’s video, I will explain how a builder gets approved and what to expect during the construction process.

Remember though, the first step to any mortgage is a proper qualification and as a USDA Approved Lender that is what we do best, so just call or email to discuss your scenario, state a new pre-qualification, or take advantage of our free Second Opinion Service (SOS).

(800) 806-9836 X 280SeanS@MPLX.org

What are builder approval requirements for a USDA New Construction Loan?

USDA Construction Loan Contractor-Builder Requirements

USDA Guidelines state the following in regards to contractor-builder requirements:

“A key to the success of the loan feature will be the financial stability and reputation of the builder constructing the home.

The approved lender and their agent, if any, will be responsible for approving participating builders.

Each builder seeking to participate will be subjected to a process that involves license verification, insurance validation, credit examination, reference verification and a criminal background check. Minimum credit examination will include obtaining a commercial credit report on the business.”

In order to be eligible to work with the USDA Single Close Construction to Permanent Loan, construction contractor or builder requirements will include the following:

Two or more years of experience building and constructing all aspects of single family dwellings similar to the type of project being proposed.

Evidence of a state-issued construction or contractor license, as required by state law or local law.

Evidence of commercial general liability insurance with a minimum coverage of $500,000.

The builder/contractor must have an acceptable credit history being free of open judgments, collections or liens related to previous construction projects. An individual credit report is required in addition to a commercial report on the business.

The builder/contractor must not have a previous felony criminal record. A background check will be performed as part of the verification process.

A builder may be limited to a determined number of units, or terminated from participating in this program due to poor workmanship or failure to meet program guidelines.

Contractors or builders who are constructing their own residence are ineligible.

Construction Draws after Closing

After the builder has been approved and closing has occurred, draws will be disbursed to fund the construction of the home which will require the borrower’s approval prior to each draw payment being made to the builder along with other third party evidence, such as inspections, to document the work was completed for the requested draw.

But, before we go, I just want to thank everyone for continuing to make us your USDA lender of choice and remember to just call or email to discuss your scenario and let us show you the “Metroplex” difference!

*Taxes and Insurance can vary from property to property.
Note: This USDA Loan calculator is for estimating purposes only and is neither a Loan Estimate or Commitment to Lend.
Minimum credit conditions will apply on all loans.

Zillow Reviews

5 stars on 2/14/2019

the efficiency of the whole team keeping me informed with my level of understanding was priceless. Thank you!
AND they were cheerful with it. ! eased a lot of would be stress..

5 stars on 1/7/2019

MetroPlex and it's team keep us informed every step of the way. In only 2 months we had closed on our first home. I would definitely recommend Sean Stephens and his crew to my friends and family.

5 stars on 12/23/2018

Sean and his staff went above and beyond for us. They kept us informed and explained the whole process to us in a way that we felt assured that we were in the right hands. We had some set backs due to sellers changing their mind and houses not passing inspection and Sean and the Metroplex staff stood by us all the way through until we finally found the perfect home and closed within 30 days. Thank you Metroplex. We would recommend Sean and his staff to anyone looking to purchase a home.